Can Plug-And-Play At The POS Overcome The Mobile Payments Gap?

One mobile-payments startup has come up with a novel approach for alternative payments: Make it really easy for retailers to add the new technology to an existing POS system. The vendor, Naratte, is getting attention for its Zoosh technology—it uses ShopKick-like high-frequency audio instead of radio signals, so it can mimic NFC-style communication on any phone that can play an MP3 file. But Naratte has also developed an inexpensive plug-in add-on for Verifone and Hypercom POS devices, so a mobile phone sending its signals will look just like a giftcard or payment card to the POS software.

That gives Zoosh instant appeal for retailers that have been showered with alternative payments wannabes, all of which seem to have brilliant business plans that contain just one hole: the part where a customer's payment-card number gets into a merchant's POS system with a minimum of fuss. That's the part Naratte has figured out at a time when anything more complicated than a magnetic strip appears to be beyond the reach of most customers—and many retailers, too.

The advantages to a plug-in for existing POS seems obvious: no POS or back-end software changes, easy testing on a few trial POS devices and a simple path for backing out of a trial (just unplug the add-on). Naratte says its add-on costs about $30; if it's really as easy to convert a POS device as the company claims, that could cover a critical part of the payment-card-number-to-POS-backend gap.

Then again, retailers have covered that part of the payments gap before for multiple technologies. Retail chains already have plenty of PIN pads that can handle contact Chip-and-PIN and contactless cards at the checkout—and soon, NFC too, if Google has its way.

But so far, getting customers to use anything other than a magnetic stripe has turned out to be next to impossible. Turning the PIN pad into the Swiss army knife of payment has mostly meant that, like a real Swiss army knife, only one blade ever gets used.

Adding yet another blade won't make Naratte a success with retailers. That will require getting lots of consumers to download and use the Zoosh app on their phones. And cutting deals with card companies to allow card numbers to be stored on the phones. And working out a coupons-and-giftcards business that really will pay the bills without touching interchange fees. And convincing everyone that its encryption makes card data secure enough to pass PCI muster. These guys have their work cut out for them, and any startup with an unusual technology is by definition a long shot.

But if Naratte really can make retail POS integration completely painless, maybe its example can convince other payment wannabes to focus on that, too.